North Carolina Insurance Laws
Small Employer
2-50 employees
Alien Insurance Company
A company that is chartered and organized in any country other than the United States. It is considered an alien company in all states.
Domestic Insurance Company
A company that resides and is incorporated under the laws of the state in which its home office is located.
Foreign Insurance Company
A company whose home office is located in another state. It is considered to be a foreign company in all states except for its home office. Ex. A company domiciled in Pennsylvania would be a foreign company in North Carolina.
Twisting
A form of misrepresentation in which an agent persuades an insured/owner to cancel, lapse, or switch policies, even when it's to the insured's disadvantage. The reason for this is normally to sell an insurance policy with another insurer.
Reinstatement and Renewal of License
A licensee who allows his or her license to lapse may, within 4 months from the renewal date, reinstate the license without retaking a pre-licensing course and state licensing exam. Continuing education requirements still need to be met and a reinstatement fee applies.
Definition of "employee"
A nonseasonal person who works on a full-time basis with a normal work week of 30 or more hours and is otherwise eligible for coverage.
Free-Look
A policyowner has 10 days to return an Accident/Health insurance policy and receive a full refund on premiums. The free-look provision of any health policy begins the date the policy is delivered to the insured.
Incontestability
After a policy has been in force for two years, the insurance company cannot contest the validity of the policy for any reason other than failure to pay the premiums. Same for both life and health insurance.
Blank Contract Application
An agent who signs a blank contract application or policy of insurance is guilty of a misdemeanor. The fine for this can be anywhere between $1,000 and $5,000.
Broker
An insurance broker in North Carolina is a representative of the insured.
Notice of Lapse
An insurance company must provide a notice to the insured 15 days before a policy will be cancelled or lapsed due to nonpayment.
Claim Forms
An insurance company will send forms for filing proof of loss to a claimant within 15 days after the company receives notice of a claim.
Suicide
An insurer may exclude liability for paying a death claim in a life insurance policy if the insured commits suicide within two years of policy issue. The insurer will return the premiums if the insured commits suicide within that period.
Rate Increases
An insurer must provide written notice to individual accident and health policyowners at least 30 days before the effective date of a rate increase.
Conformity With State Statutes
Any provision of this policy which is in conflict of the state in which the insured resides on the date of issue is understood to be amended to conform to the statutes of that state.
OB-GYN Coverage
Each health plan will allow female participants 13 and older access to the services of an obstetrician-gynecologist.
Complaint Record
Each insurer or its agents must maintain, for at least 5 years, a log of all written complaints listing the following: • Department file number; • Name of insured; • Nature of the complaint, • Department subject to the complaint; • Policy or claim number of the insured; and • Disposition of the complaint.
Employee Eligibility
Employees shall be added to the master group coverage no later than 90 days after their first day of employment.
Reinstatement (health insurance)
If a health policy is reinstated after it has lapsed for nonpayment, there is a waiting period of 10 days before a claim covering sickness will be covered. Injuries sustained from an accident, however, will be covered immediately.
False Pretenses and Cheats
If any insurance agent, broker, or administrator embezzles or fraudulently uses or withholds any money received as a result of acting as an agent, broker, or administrator, he/she can be charged with a felony.
Free Look Period
In North Carolina, life insurance policies must provide a minimum free-look period of 10 days upon policy delivery. A delivery receipt is a signed document that starts the free-look period.
Time of Payment of Claims
Indemnity claims will be paid immediately upon receipt of written proof of loss. Disability claims will be paid no less frequently than monthly.
New Residents
Licensed agents moving to North Carolina from another state have 90 days within cancelling their previous license to apply for a resident license here. After 90 days, the applicant must complete prelicense education and pass the state exam in North Carolina.
Grace Period
Life insurance policies must provide a grace period of 31 days after the due date. If the insured dies during the grace period, the insurance company may deduct any premium due from the death benefit.
Minors
Minors in North Carolina age 15 and up can enter into life insurance contracts and have all the rights that come with ownership.
Insurance Information and Privacy Protection Act
Purpose is to establish standards for the collection, use, and disclosure of information gathered in connection with insurance transactions. Is designed to limit or direct the information collection activities of: • agents and limited representatives • insurance support organizations • insurance companies Requires that an applicant for an individual insurance policy be notified of an investigation into his personal character, general reputation, and mode of living. An insurance company MUST clearly specify questions designed to obtain information solely for marketing research in any insurance transaction. When access to recorded personal information is requested following an adverse underwriting decision, the insurer must make the information available within 30 business days. Any reported violations of this Act require the Commissioner of Insurance to issue and serve a statement of charges and notice of hearing. The date of such hearing shall be at least 10 days after service of charges.
Continuing Education
Resident agents must complete 24 hours of continuing education every 2 years to keep their license active. 3 of those hours must be in ethics. • The Board of Insurance Agent Education develops the continuation education program and submits the proposal to the Commissioner for approval. • Nonresident agents are not required to complete North Carolina continuing education requirements as long as their home state requirements are met.
Examination of Records
The Commissioner can examine anyone in the business of insurance in the state at anytime. The Department will review insurance companies for financial stability at least once every 5 years.
Cease and Desist Order
The Commissioner has the authority to examine and investigate the affairs of any person engaged in the business of insurance in this state. Based on the investigation, the Commissioner may issue a cease and desist order. Any person who willfully violates a cease and desist order of the Commissioner may be subject to a fine of $1,000 to $5,000 for each violation.
Notice and Hearing
The Commissioner may call and hold hearings for any purpose deemed necessary. At least 10 days written notice will be given to all persons affected by the hearing.
Temporary License
The Commissioner may issue a temporary insurance agent license for a maximum period of 180 days (or longer for good cause) without requiring an examination if the Commissioner deems that the temporary license is necessary for the servicing of an insurance business.
Grace Period (Health)
The grace period for health and accident insurance is required to be no less than 7 days for weekly premium policies, 10 for monthly premium policies, and 31 for all other policies. If premium is paid within the grace period, coverage shall remain in effect.
Legal Action
There is a waiting period of 60 days to file a lawsuit after a claim for loss has been filed by the insured. No lawsuit may be filed after 3 years has passed from when the claim was submitted.
Reinstatement
Unless a policy has been surrendered for its cash value, a policy can be reinstated within 5 years after the date of premium default. The requirements of reinstatement include: • Written application • Payment of any past due premiums or indebtedness to the insurer • Evidence of insurability
Proof of Loss
Written proof of loss must be furnished to the insurer within 180 days after the date of such loss.
Minimum Maternity Benefits
any policy that provide maternity benefits must provide coverage for a minimum of 48 hours of inpatient care after a delivery and a minimum of 96 hours of inpatient care after a cesarean section for a mother and her newly born child
Continuation of Coverage
• Continuation of group health coverage is only available to those employees who were covered under a group plan for a minimum period of 3 months prior to the date of termination. • Continuation of coverage of a group Hospital, Surgical, and Major Medical Policy must include hospital expenses. • The eligible employee can elect continuation of coverage for at least 60 days and up to 18 months after termination, as long as the premiums are paid by the employee. No more than 102% of the full group rate will be charged to that employee. • Continuation payments need to start being paid by the employee within 31 days of termination to be eligible for continuation coverage. • Continuation coverage is not required to include dental, vision, or prescription drug benefits.
Nonresident Agents
An agent who holds a resident license in a different state may apply for a nonresident license in North Carolina, as long as both states have a reciprocal agreement. To apply, nonresidents must submit an application form, proof of resident license in good standing, and fees. Nonresident agent applicants do not have to take the North Carolina state licensing exam, but must not have committed any act for which the license could be denied, suspended, or revoked.
Viatical Settlement
An agreement under which the owner of a life insurance policy sells the policy to another person in exchange for a bargained-for payment, which is generally less than the expected death benefit under the policy. • The viator is considered to be an individual suffering from a terminal illness or severe chronic illness who sells his/her life insurance policy to a viatical settlement provider. • The provider becomes the policyowner and assumes responsibility for paying premiums. When the insured dies, the provider receives the death benefits.
Medical examinations and lab tests including HIV
For underwriting an individual policy, insurers may require proposed insureds to undergo an HIV test, but only in conjunction with other medical tests. The basis for requiring an HIV test cannot be the proposed insured's sexual orientation. The insurer must obtain written consent from the proposed insured in order to conduct the HIV test.
Denial of License
If the Commissioner refuses to issue a license for any reason, a license may be suspended, revoked, or denied. The applicant will be notified in writing. Within 30 days after service of the notification, the applicant may make a written appeal to the Commissioner for a review. The review must be completed without undue delay, and the applicant must be notified promptly in writing as to the outcome of the review. If the applicant still disagrees with the outcome, he or she may appeal for a hearing within 30 days
Newborn Child Coverage
All individual and group health plans which provide coverage to family members of the insured must provide coverage for the insured's newborn child at the moment of birth. If a premium is required to continue the newborn's coverage, it must be paid within the first 31 days to continue coverage. Coverage includes injury and sickness, including medical care for diagnosed congenital defects and birth abnormalities.
Agent Requirements
An applicant for a resident agent license in North Carolina must submit an application to the Commissioner and • Be at least 18 years of age • Not have committed any act that is grounds for denial, suspension, or revocation • Completed a 20-hour pre-licensing course • Have passed the state exam for the lines of authority in which licensure is sought • Submit the application with fees • Not intend to use the license primarily to write controlled business • Be deemed trustworthy and competent
Group Life Insurance
• The employees eligible for group insurance under the policy shall be all of the employees of the employer. • In the event of a termination of a group life plan or termination of a covered employee, a person covered by a group policy has the right to convert such coverage to an individual policy within the conversion period (31 days) without proving insurability. If this right is exercised, the employee is responsible for the payment of premium. There are no restrictions regarding the assignment of coverage under a group life insurance policy
Commissioner of Insurance
Enforces all laws of the state governing insurance companies and makes rules and regulations relating to the business of insurance. The Commissioner is elected to office for a term of 4 years. If a vacancy occurs during the term, it shall be filled by the Governor for the unexpired term. The Commissioner's powers and duties include: • Enforcing and carrying out all the provisions of the General Statutes • Adopting rules and regulations to enforce provisions of the General Statutes • Adopting rules pertaining to solicitation of proxies, including financial reporting of equity securities of any domestic stock insurance company • Approving forms used by companies, association, orders, or bureaus • Receiving and thoroughly examining all financial records • Reporting in detail to the Attorney General any violation of insurance laws • Instituting civil actions or criminal prosecutions by the Attorney General for any violation • When requested by any citizen of this state, providing a synopsis of the provisions of any insurance contract which is offered or issued • Compiling and making available to the public lists of rates charged, including deviations, and explanations of coverages that are provided by insurers
Business Records
Every insurance agent/broker MUST maintain all records, books, and documents for insurance transactions for a period of no less than 5 years.
